The Weekly Wrap Up February 28, 2020

28 Feb 2020

DOMESTIC:

Biocon gets 3 USFDA observations for insulin facility in Malaysia

PVR Cinemas opens fifth multiplex in Vadodara; becomes largest operating chain

M&M arm to sell stake in 3 firms to CLP

USFDA reopens investigation of Aurobindo’s unit 4 facility

Dr. Reddy's Laboratories gets EIR from USFDA for Duvvada formulations manufacturing plant

BHEL bags battery energy storage system order under TERI consortium project

HUL to set up subsidiary to save on tax

NTPC gets CCI nod to acquire entire stake in NEEPCO, THDC India

USFDA inspection of Unichem Lab's Roha facility completed with no observation

Lupin receives 2 USFDA observations on Pithampur unit

KEC International buys tower making units in Dubai to expand Middle East operations

Coronavirus outbreak affects TVS Motor's production by 10% in Feb

Abbott launches quadrivalent vaccine for influenza in India

IRB Infra bags prestigious Mumbai-Pune Expressway Project

ECONOMY:

India's economy likely grew 4.7% in December quarter

January records PE investments worth $2.5 billion: Report

RBI announces 2 long-term repo operations early next month

INDUSTRY:

Money flow from banks to NBFCs picks up in Oct-Dec

Indian auto industry to be negatively impacted, supply chain disrupted if Coronavirus persists: ICRA

Govt. approves Rs4,558cr scheme for the dairy sector

Highlights of the Week

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The Week That Went By:

D-Street started the week with a massive cut of 250 points as fear of Corona virus accelerated. Following Global equities, Indian markets continued to extend its losses without any pullback and ended the week with a biggest loss in 11 years.

Nifty 50=11201.75 BSE Sensex30=38297.29 Nifty Midcap 100=16786.35 Nifty Smallcap100=5675.05

COVERAGE NEWS: Morganite Crucible (India) Ltd: The call was initiated at Rs1047. After having achieved the fourth target of Rs2000; we have revised the target to Rs2500 over a 12 months horizon.

Hind Rectifiers Ltd: The company has accepted the offer made by MIDC, Sinner Nasik for land allotment (with a lease period of 95 years) for future growth; additionally has deposited the earnest money for the same.

ITD Cementation India Ltd: The company has informed that ICRA has reviewed the credit rating and removed the credit rating from 'rating watch with developing implications' and has assigned 'Stable' outlook. The long term rating for the company is [ICRA] A (Stable) and short term rating is [ICRA] Al.

KSB Ltd: The company has launched two new products under Water Application Pump category and Slurry Recirculation Pump category. Currently, both the products will cater to the domestic market.

Bharat Bijlee Ltd: Board of Directors of the company has by way of circular resolution, passed on 25.02.2020 considered and declared an interim dividend of Rs12.50/- (i.e. 125%) per equity share of Rs10/- each, for FY20.

Texmaco Rail & Engineering Ltd: The company has incorporated a wholly-owned subsidiary viz; Texmaco Rail Electrification Limited to explore the business potential in the field of rail electrification.

HFCL Ltd: The company has selected AudioCodes to provide the voice access infrastructure for a next-generation telecom network for the Indian Army under the Network for Spectrum project.

Sudarshan Chemical Industries Ltd: The Board of Directors has declared an interim dividend of Rs6.30/- per equity share (inclusive of a special dividend of Rs0.50/- per equity share) of Rs2 each for FY20.

28 Feb 2020

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Result Synopsis

Company Result This Week

Vesuvius India Ltd: CMP: Rs1145 Target: Rs1300

For the quarter, despite a marginal growth in the topline, the company has reported decent results at the operational levels and has been trying to maintain its Ebitda margins in the range of 13-15%. However, on a full year basis, the performance was not as per our expectations at the Sales (projected at a growth of ~4%) and RM costs (attributed to the external factors) which in turn trickled down to lower estimations on the operational efficiency and PAT. However, going forward, with a gradual pick up expected we feel that the company stands decent to capitalize. Thus, we maintain our target price of Rs1300 over a 12months horizon

KSB Ltd: CMP: Rs679 Target: Rs1100

The company ends its current fiscal year on a decent note and a steady performance in the December quarter. For the yearly performance, although the company clocked highest revenue growth in the last 5 years; the margins remained sticky as compared to the previous year. As far as quarterly performance is concerned, inspite of a revenue dip, we saw an uptick in EBITDA and NPM margins, attributed to low input costs with the additional benefit of lower tax rate. Going forward, the Government’s proposal of Rs3.6lakh-crore for piped water supply to every household, will benefit the company. Thus, it gives us some clarity on the company’s performance expected in the year 2021, where there is slowdown concern of the economy. On the development side of its product portfolio, the company has recently launched two new products catering to the domestic market. Considering the above positives, we maintain our price target of Rs1100 in a 12-month horizon.

Result Snapshot:

In the midst of global slowdown and hit taken across the different industries, nothing much was expected by the quarter. This was no exception for our coverage but definitely the negativity was milder. To take positives first, the companies that benefitted due to raw material costs were Alkyl Amines, Transpek and Triveni Turbines. It was good to see operational efficiency across Vesuvius, Grauer & Weil, Dynamatic, Hitech Corp and Bharat Bijlee. It was a decent quarter for Gufic with slight dip on operational efficiency, KCP, Indian Hume Pipe, Texmaco Rail, HFCL, Anuh Pharma, Huhtamaki PPL and Westlife Development. KSB, NACL, Mishra Dhatu Nigam, Nesco, Hind Rectifiers, Engineers India, Morganite, Sudarshan Chemical, Thermax, Srikalahasthi and Kirloskar Pneumatic had a good quarter reported. Alembic Pharma had an exceptionally strong quarter and growth momentum continued for GMM Pfaudler. Inspite of the slowdown, Remsons reported positively surprising numbers. The Auto hit was taken by Munjal Showa, Timken Bearings, Hitech Gears and Alicon Castalloy. Supreme Petrochem had a disappointing quarter. It was the worst hit in the quarter for NRB bearings, VSSL and SKF India. It was a flat quarter for ITD Cementation, Zen Technologies and Hikal. Slowdown impacted Artson Engineering, Shanthi Gears. Raw material was the spoilt sport for Excel Industries and Bharat Rasayan. While BASF was below expectations, Integra Engineering and Kokuyo were tepid. It was a gestation phase for Snowman. ICICI bank was in-line with expectations. Gulshan Polyols showed improvement in margins. Siemens is on track for profitable growth. Castrol clocked gross margin expansion with good set of numbers. Overall, we feel that there is slowdown sinking across the different industries which is evident through the performance of catering companies. One needs to be cautious while picking the stocks with a strict disciplined investment approach.

Recommendations adjusted as per Corporate Actions

Company Reco Target Corp Action Adj Price Adj Tgt Price

Appreciation

IHP Ltd 341 600 Bonus 1 : 1 171 500 6%

Engineers India Ltd 211 200 Bonus 1 : 1 105 200 -33%

Gulshan Polyols Ltd 390 500 Stock Split from Rs.FV 5 to Rs.FV 1 110 78 -46%

Nesco Ltd 2397 3200 Stock Split from Rs.FV 10 to Rs.FV 2 479 640 51%

Castrol India Ltd 447 550 Bonus 1 : 1 223 200 -35%

Hikal Ltd 143 325 Bonus 1 : 2 95 216 36%

*Castrol, Vesuvius– Dec Ending | Siemens—Sept Ending|

28 Feb 2020

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Coverage Universe Valuations Company Reco Reco at

(Rs) CMP (Rs)

Tgt price (Rs)

Appreciation 1M Var 3M Var 12M Var

Supreme Petrochem Ltd BUY 77 150 275 95% -19.8% -6.9% -27.6%

Shanthi Gears Ltd BUY 107 88 150 -17% -9.9% -11.0% -23.3%

Hind Rectifiers Ltd BUY 69 167 275 142% -32.2% -21.3% 51.8%

KCP Ltd BUY 71 60 105 -15% -11.5% -2.7% -29.1%

The Hitech Gears Ltd BUY 298 150 300 -50% -22.5% -11.8% -49.3%

Bharat Bijlee Ltd BUY 787 768 1500 -2% -9.7% -8.3% -25.0%

Triveni Turbines Ltd BUY 92 95 150 4% -2.8% 1.2% -6.6%

Siemens Ltd BUY 1128 1300 1750 15% -13.7% -12.6% 30.1%

GMM Pfaudler Ltd BUY 332 2850 3200 758% 13.3% 72.7% 152.2%

Alicon Castalloy Ltd BUY 288 289 650 1% -29.4% -21.9% -49.5%

Gufic Biosciences Ltd BUY 50 65 120 29% 1.8% -5.1% -8.8%

Excel Industries Ltd BUY 380 685 1200 80% -27.0% -19.8% -35.1%

Vesuvius India Ltd BUY 1165 1145 1300 -2% 4.5% 8.0% -0.1%

Munjal Showa Ltd BUY 191 103 191 -46% -25.2% -19.7% -38.9%

Bharat Rasayan Ltd BUY 2747 7167 9000 161% 11.6% 15.2% 92.6%

Alkyl Amines Chemicals Ltd BUY 391 1550 1700 296% 18.6% 45.4% 149.4%

Grauer and Weil (India) Ltd BUY 45 48 65 7% -7.6% 0.2% 2.3%

Texmaco Rail & Engineering Ltd BUY 91 25 91 -72% -32.8% -38.3% -57.1%

Nagarjuna Agrichem Ltd BUY 29 29 45 1% -6.1% 10.1% -1.5%

ITD Cementation India Ltd BUY 158 53 100 -66% -13.8% -15.2% -49.3%

Westlife Development Ltd BUY 266 452 450 70% 3.7% 22.2% 28.0%

Dynamatic Technologies Ltd BUY 2160 852 1700 -61% -16.8% -11.9% -39.8%

Hitech Corporation Ltd BUY 175 76 125 -57% -51.7% -4.2% -19.3%

NRB Bearings Ltd BUY 138 85 138 -38% -15.5% -13.1% -60.0%

Kokuyo Camlin Ltd BUY 132 63 132 -52% -24.5% -12.3% -28.4%

Timken India Ltd BUY 883 957 1250 8% -2.9% 11.9% 66.5%

Morganite Crucible (India) Ltd BUY 1047 1920 2500 83% 26.1% 23.1% 35.2%

Vardhman Special Steels Ltd BUY 151 64 110 -58% -19.7% -2.2% -35.2%

Zen Technologies Ltd BUY 115 55 125 -52% -6.9% -8.8% -21.7%

KSB Ltd BUY 820 679 1100 -17% -7.4% 0.0% 4.1%

Thermax Ltd BUY 1019 924 1230 -9% -13.4% -8.1% -5.8%

Transpek Industry Ltd BUY 1547 1847 2000 19% 15.5% 47.7% 30.0%

BASF India Ltd BUY 1954 1030 1400 -47% 1.9% 4.3% -23.1%

Artson Engineering Ltd BUY 64 33 55 -48% -22.7% 13.8% -5.7%

Remsons Industries Ltd BUY 104 78 130 -25% 11.6% -2.7% -5.1%

Snowman Logistics Ltd BUY 33 43 55 30% 0.2% 9.9% 44.0%

Alembic Pharmaceuticals Ltd BUY 605 631 751 4% -0.3% 11.5% 13.7%

SKF India Ltd BUY 1942 1860 2620 -4% -14.4% -13.1% -4.0%

HFCL Ltd BUY 25 15 25 -42% -13.9% -14.9% -31.1%

Sudarshan Chemical Industries Ltd BUY 372 462 500 24% -2.3% 15.9% 44.4%

Huhtamaki PPL Ltd BUY 254 263 320 4% 5.5% 7.5% 35.9%

Mishra Dhatu Nigam Ltd BUY 123 246 190 100% 48.5% 51.5% 113.6%

Anuh Pharma Ltd BUY 142 141 175 -1% -2.7% 6.8% 14.7%

Kirloskar Pneumatic Co. Ltd BUY 134 138 192 3% -13.8% 0.1% -23.7%

Integra Engineering India Ltd BUY 37 31 50 -16% -25.5% -27.9% -42.1%

ICICI Bank Ltd BUY 535 496 657 -7% -6.1% -4.5% 42.2%

Srikalahasthi Pipes Ltd BUY 205 201 250 -2% 7.7% 22.6% 11.8%

Acrysil Ltd BUY 115 116 150 1% 8.0% 14.3% 11.6%

IHP Ltd BUY 171 181 500 6% -22.4% -17.5% 32.3%

Engineers India Ltd BUY 105 70 200 -33% -29.0% -32.3% 31.0%

Gulshan Polyols Ltd BUY 78 42 78 -46% -16.0% 6.7% -19.1%

Nesco Ltd BUY 479 723 800 51% -1.8% 18.2% 66.9%

Castrol India Ltd BUY 223 145 200 -35% 8.8% 1.6% 86.7%

Hikal Ltd BUY 95 130 175 36% -0.3% 15.9% 20.2%

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24 Jan 2020

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As depicted in the chart, Benchmark Index is moving in a channel and at present stands close to lower end of the channel which comes around 11,000. Due to Corona virus fear, almost each and every sector has ended the week with a massive cut; some stabilization is much needed before resuming its uptrend.

MARKET OUTLOOK

NIFTY (WEEKLY)

BANK NIFTY (WEEKLY)

28 Feb 2020

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24 Jan 2020

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NIFTY 50 COMPONENTS (WEEKLY PERFORMANCE)

SECTORAL PERFORMANCE

HDFC Bank -3.14

Hero Motocorp -8.79

Hindalco -18.42

HUL -2.94

ICICI Bank -8.66

Indusind Bank -6.86

Infratel -4.13

INFY -8.13

IOC -5.47

ITC -5.44

Jsw Steel -17.14

Kotak Bank -3.86

LT -7.09

M&M -12.84

Maruti -6.62

Nestle India -4.86

NTPC -4.17

ONGC -10.40

PowerGrid -4.21

Reliance -10.76

SBIN -7.11

Sun Pharma -7.81

Tata Motors -18.33

Tata Steel -14.08

TCS -6.82

Tech Mahindra -9.81

TITAN -5.13

Ultratech -4.83

UPL -10.35

VEDL -20.81

Wipro -9.56

Yes Bank -3.38

Zee Entertainment -8.54

Adani Ports -6.92

Asian Paints -1.90

Axis Bank -5.97

Bajaj Auto -5.62

Bajaj Finserv -6.33

Bajaj Finance -7.94

Bharti Airtel -4.07

BPCL -10.24

Britannia -3.20

Cipla -7.25

Coal India -6.34

DR Reddy’s Labs -10.35

Eicher Motors -11.88

Gail -13.19

Grasim -8.62

HCL Tech -11.64

HDFC -7.69

28 Feb 2020

* Gain/ Loss in %

With a massive cut of over 14%, Metal sector was the underperformer of the week. Majority of the components has ended the week with a loss in the range of 10%-15%.

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SECTORAL LOSER

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28 Feb 2020

With the Market sentiment being bearish all the sectors have ended the week on a negative note.

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